Comped Rooms at Atlantic City Casino Hotels Estimated
at 68% of the City's Total in 2004; Some Question
Long-standing Practice

By Suzette Parmley, The Philadelphia InquirerKnight Ridder/Tribune Business News

Jul.
3, 2005 - ATLANTIC CITY -- Getting a hotel room anywhere at the Jersey
Shore on summer weekends is never easy, but in a city where seven out
of 10 rooms are given away, or "comped," to loyal gamblers, it's
virtually impossible.

Charles Davis and Diane Cisse of New York found that out on a recent Saturday.

"We're
all sold out," a Trump Taj Mahal hotel sales agent, Nilay Jain, said as
he handed Cisse a list of hotels and motels within a half hour of
Atlantic City. The Taj Mahal and every other casino hotel was booked.

Comping
rooms is a way for casinos to reward their best customers, on the
theory that casinos can make up for the giveaways as customers spend
big bucks on gambling. But there is a growing divide in the industry on
whether Atlantic City should continue its long-standing practice of
comping rooms, or should sell more rooms to attract customers who do
more than gamble such as shop in town.

Some argue that by
giving away so many rooms to loyal gamblers, casinos are missing a
chance to cultivate new patrons and are shutting out the type of
customer the city needs to make the transition from daytripper resort
to overnight destination.

At least three casinos -- Harrah's,
the Borgata, and Trump Taj Mahal -- plan to break ground on hotel
towers this year, which would add at least 3,000 rooms to the market.
But industry executives and tourism and convention officials say the
resort city, which has 15,152 rooms now, could easily absorb 10,000
more.

Unlike Las Vegas, Atlantic City has too few hotel rooms
to attract major conventions. Tourism promoters say the room shortage
is a factor in why Atlantic City International Airport lacks major
commercial air service.

Rooms are available during the
workweek, but that's not when most visitors want them. Demand is high
on Fridays and weekends all year, but can be so soft midweek that
casinos and convention officials scramble to fill rooms.

The
fluctuations are consistent year after year. Occupancy peaked at 98
percent last summer, but hit a low of 83 percent last winter.

Jeffrey
Vasser, executive director of the Atlantic City Convention &
Visitors Authority, said he sought out meeting planners willing to
stage shows in the off-season and during the week.

"It gets tricky if they want to stay over the weekend," Vasser said.

Free
rooms were not always so widespread. About 32 percent of Atlantic
City's casino hotel rooms were comped in 1988. That number had reached
54 percent in 1995 and escalated to 64 percent in 2000. Last year, 68
percent of the city's rooms were given away free. Most of the increase
was attributed to the dramatic spike in the percentage of rooms comped
by Showboat and Harrah's Atlantic City casinos, after Harrah's
Entertainment Inc. acquired Showboat in 1998. By 2004, their combined
comp rate was 85.5 percent.

As Davis and Cisse were being
turned away at the Trump Taj Mahal, not much farther down the
Boardwalk, Christine Himmler-Corker, 65, and Michael Corker, 59, were
settling in at the Trump Plaza.

"This is our home away from
home," Himmler-Corker said as she sat in front of her favorite slot
machine, Cleopatra, on the cavernous casino floor.

The Corkers
have been a fixture at Trump Plaza for 12 years. Besides a free room,
meals and beverages every weekend, the casino showers them with
appliances, jewelry and other gifts.

"It's a business decision
to hold those rooms or save them for our better customers," said Steve
Calabro, senior vice president of marketing at Trump Plaza. "All
businesses do it in some form."

Providing a free room can also entice a customer to return to his or her "home" casino after an absence.

"They
really work. I love them," Shirley Lambert, 39, of Southwest
Philadelphia, said, as she checked into a comped room at the Showboat
Casino Hotel on a recent Friday night with her husband and mother. The
Mardi Gras-themed casino had the highest comp rate in Atlantic City, 86
percent, last year. Lambert has been a regular at Showboat for five
years and gambles about $200 on slots every two weeks there.

Harrah's
-- which now owns the city's Showboat, Caesars, Bally's and Harrah's
casinos after acquiring Caesars Entertainment Inc. last month -- has
aggressively promoted its customer loyalty program, called Total
Rewards, since 1999. Players receive comp rooms based on their slots or
table game play, which is tracked by computer.

"We just have
tremendous demand from our database because of a gaming-centric
philosophy," said Harrah's regional president Dave Jonas. "Our rooms
first go to database customers who are loyal to us and have shown a
propensity to come back to us over and over again."

The
Tropicana Casino Resort and the two-year-old Borgata Hotel Casino &
Spa, which spent heavily to include non-gambling attractions, still
sell many of their rooms.

When the Tropicana's $285 million
Quarter -- a retail, dining and entertainment complex -- opened last
November, it included a new hotel tower with 502 rooms. Tropicana had
the lowest comp rate, 48 percent, among the city's 12 casinos last
year. On any given month, about half its rooms are sold.

"We
feel Atlantic City cannot grow if we do not go after new markets," said
Tropicana president and general manager Pam Popielarski. "Cash
customers are your future gamblers."

To go after them,
Tropicana has gone against convention and put rooms on sale during
holidays and Saturday nights for the last five years. For Fourth of
July weekend, the casino made available rooms ranging in price from
$399 to $459 on Saturday or Sunday, and $299 to $349 on Monday.

"You
have to have a balance," Popielarski said. "If we did none of this, we
won't grow the market. We'll go after the same customer over and over
again."

Part of the Borgata's business strategy since opening
in July 2003 was to sell rooms to help generate other revenue. The Las
Vegas-style mega-casino's 2,002-room luxury hotel charged the most --
an average of $126.44 per night for a room last year -- and still had
the fourth-highest occupancy rate, 92.3 percent. It had a 60 percent
comp rate, the third lowest.

"Everybody has the same challenge
midweek because there's excess capacity," said chief operating officer
Larry Mullin. "Operators will have to learn to do other things to
occupy those rooms. They can't just keep giving them away."

The
casinos have added 4,000 rooms in the last three years as part of
Atlantic City's building boom. Several casinos, including Bally's and
Sands, are spending millions to renovate their rooms. Others, such as
Harrah's, are rethinking how to best market new ones. Harrah's plans to
break ground after Labor Day on a $458 million hotel tower with 800
rooms.

As more states offer gambling, including Pennsylvania, Atlantic City has to change, Popielarski said.

"What
you're doing is bringing in a new customer to Atlantic City that
couldn't get into Atlantic City before and allowing him in," she said.
"You're becoming a destination resort, which we need to become, and not
just a gambling resort."

Davis and Cisse, the New York couple
who came down for dinner, a stroll on the Boardwalk, and a little
gambling, were able to spend Saturday night at a $200 room at a Best
Western near the Boardwalk. But they had to dash their plans to stay
another night when all they could find was a package deal for both
nights at the Sheraton Convention Center Hotel for $495.

"No way," Cisse said. "That's rent money."

-----

To see more of The Philadelphia Inquirer, or to subscribe to the newspaper, go to http://www.philly.com.